Search watoday:

Search in:

Banks eyeing each other on rate cut

The big banks are delaying a decision on loan rates to protect market share and attract new customers, their lobby group argues.

Only two banks - ING Direct and Bank of Queensland - have responded to the Reserve Bank's 0.25 per cent cut to the official cash rate on Tuesday.

ING Direct has passed on the full rate cut, while the Bank of Queensland has lowered its standard variable rate by 20 basis points.

The Australian Bankers Association (ABA) insists the big four banks - Commonwealth, Westpac, NAB and ANZ - are holding back decisions because they want to be competitive.

Advertisement

"They are sitting there at the moment desperately wishing their competitors show their hand first so they can undercut," ABA CEO Steve Munchenberg told ABC Television on Wednesday, adding they wanted to protect their market share and win new customers."

Mr Munchenberg said a rate cut was not good news for everyone.

"One group of people that is consistently forgotten in this debate are the very many Australians with savings, self-funded retirees and others," he said.

Shadow treasurer Joe Hockey says there is less pressure in the local market to force banks to pass on the whole rate cut.

There had been a significant reduction in competition in the banking sector since Labor came to power in late 2007, he said.

The government had warned the banks more than 55 times to pass the RBA cuts in full.

"The banks have ignored them, which is no surprise because ultimately no one listens to the government," Mr Hockey said.

Opposition Leader Tony Abbott said the record of the previous coalition governments showed the banks almost nearly always passed on any RBA rate cut in full.

"Since Wayne Swan has been the treasurer the banks have invariably procrastinated," he told reporters in Brisbane.

He said former coalition treasurer Peter Costello had to deal with global financial instability including the Asian financial crisis in 1997/1998 and the tech wreck in 2000.

"There are always financial ups and downs," Mr Abbott said.

"But invariably during almost 12 years of his (Mr Costello's) stewardship when the government/treasurer spoke, the markets reacted appropriately.